Open AccessESG impact on financial corporate performance and portfolio returns: evidence of Australia and Japan
Author(s) -
Margarita Chrissanthi Kazakakou Powaski,
Carolina Daza Ordoñez,
Laura Jáuregui Sánchez
Publication year - 2021
Publication title -
vinculategica efan
Language(s) - English
Resource type - Journals
ISSN - 2448-5101
DOI - 10.29105/vtga7.2-5
Subject(s) - market capitalization , corporate governance , index (typography) , capitalization , business , portfolio , accounting , stock market index , stock (firearms) , stock market , financial economics , finance , economics , mechanical engineering , paleontology , linguistics , philosophy , horse , world wide web , computer science , engineering , biology
Environmental, Social, and Governance investing has undergone a radical shift; companies and investors have focused on the impact of the disclosure of the practices and policies related to the environment, social responsibility, and governance in their operational strategies and investment. The purpose of this paper is to demonstrate the impact that the ESG policies have on public companies' stock returns in Australia and Japan. Accounting and market-based measures are used to determine the impact ESG practices have on stock market index returns. The annual data used is of companies from Australia's S&P/ASX Index and Japan's Nikkei 225 Index, covering the period from 2005 to 2019. Fixed effect model regression was used to test the significant relationship between companies' stock returns and ESG score, accounting, and market-based measures. Portfolios were created to analyze the risk/return relationship between companies with and without ESG across countries. The findings indicate mixed results. Australia´s non-ESG portfolios outperform the S&P500 and ESG portfolios. Japan´s portfolio has positive returns but underperforms the benchmark. Low market capitalization portfolios with and without ESG outperform the higher capitalization portfolios.